Blog: 4 reasons why all eyes should be on Latin American tech in 2023

Disrupt, disrupt, disrupt: 4 reasons why all eyes should be on Latin American tech in 2023

by Anya Breen, Atara Principal

Back in 2018, visiting executives from Softbank were puzzled by the state of tech in Latin America. They highlighted that the region had a far smaller startup ecosystem than South-East Asia, despite having the same population and twice the GDP. All the components seemed to be in place, including some of the highest levels of internet and mobile penetration in the world, ambitious founders, a young population of early tech adopters, great graduating engineering talent, and low competition. In 2019 they announced a $5bn fund dedicated to the region in a gamble that would pay off.

In 2020 start-up exits brought in $20bn. In 2021, VC backed companies raised almost $15 billion in investment, more than the total tech capital raised across the 6 preceding years. The year closed out with 34 unicorns across Latin America. The region had only achieved two unicorns by 2017. In 2022 this has risen to nearly 50 despite global tech entering an era of much more conservative valuations.

Brazil’s Nubank was one of the early darlings of the Latin American tech scene and has paved the way for limitless founder aspirations in the region (Image sourced from

The reasons behind this have been cited as much the same as the reasons Softbank invested in 2019: Latin American countries have young, tech-savvy populations who are underserved by existing economic institutions, or the ‘real economy’. Partners at Sequoia voiced in a recent publication that Latin America is “the ideal setting for the internet economy to disrupt the real economy” and that tech has the opportunity to deliver “fundamentally better consumer experiences”.

This doesn’t mean an easy ride, as one Latin American founder, Deepak Chhugani, recently highlighted in Forbes: a lack of existing infrastructure often means disruptors have to build full-stack solutions as opposed to capitalising on incremental changes. However, the benefits of this include durable business models, high barriers to entry and sizable venture returns. Kavak is a great example of this, as a result of building their own infrastructure in-house for their marketplace they were able to achieve a $0 to $4 billion valuation in 5 years. 

VC investments in recent months reflected the conservative scale back worldwide, in comparison to 2021 there is a hesitancy that is all the more pronounced in comparison to the 2021 boom.

So why should all eyes be fixed on the Latin American tech sector in 2023? 

1. Despite caution, capital isn’t going anywhere

Since 2019 Softbank have been rapidly growing their commitment to the region. This year they announced that they will spin off their dedicated early stage fund and existing portfolio of startups in the region into a new business named Upload Ventures. 

Investor pullback across the board worldwide has been dramatic but private and VC investment in Latin America still sits well above pre-pandemic levels according to the Wall Street Journal due to continued digital trends. Laura Gonzalez at VentureCity claims that, rather than a downturn, Latin America Investment is seeing a return from the “anomaly” of 2021 after a rush of “tourists” and fickle investors has slowed. This ‘new normal’ includes deal activity and funding levels well above 2022 levels. According to CB Insights deal volume has been consistent in the region even as cheque sizes have shrunk. 

In addition to investment powerhouses like Softbank, Sequoia, further early stage focused VCs such as A16z have also made significant inroads into the region. This has combined with an uptick in Latin America-based VCs and VC builders such as the likes of Colombia based Polymath Ventures, Argentina based NXTP, and Bossanova, Kaszek, Latitud and Monashees from Sao Paulo which all contribute to a more sustainable, self-sustaining VC landscape in the region. 

The most active Latin America investors in 2021 according to a study from Endevour Mexico and Glisco Partners. This deal flow has slowed in 2022 but remains much higher than pre-pandemic levels.

2. The pandemic has catalysed digital trends that are here to stay

Living in Santiago, the Latin American tech boom is not a spreadsheet phenomena but a daily reality. FinTechs like Fintual and Fintoc, Delivery tech such as Justo and Cornershop (acquired by Uber) and food tech rocket ships like NotCo and Wild Foods are Chilean founded startups that have been part of a practical, cultural and economic sea change which has infiltrated into everything from daily conversations to full scale industry power shifts. 

As Colombia based VC Latitud noted, citing Atlantico’s Latin America Digital Transformation Report for 2022, Latin America is one of the few regions where pandemic sparked digital trends have persisted. Brazil’s population spends more time on social media than that of the US, this reflects high social media consumption across the region that has only grown in recent years. An uptick in ecommerce has also not returned to pre-pandemic levels in the region as demonstrated in the graph below. In addition, remote work is the new norm, particularly within tech and consulting.

Ecommerce share of retail from Atlantico’s Latin America Digital Transformation Report 2022

Given the scale of opportunity when it comes to digitalisation across the region, which is demonstrated by the dramatic success of Nubank and fintech in general in the region, this acceleration of digitalisation is adding fuel to fire when it comes to the startup ecosystem more broadly. 

3. Qualified tech talent is on the up

With over 475000 tech graduates per year Brazil is a hotbed for engineering talent. The Brazilian government has invested heavily in IT engineering at its prominent universities and this has resulted in tech giants including Meta, Google, IBM and Unisys providing an enviable early career training ground for future startup hires. 

Although Sao Paulo has dominated the Latin American tech scene there is an increasing focus on other tech hubs in the region. Mexico, Chile, Brazil and Colombia have enacted favourable policies for entrepreneurs, enriching the startup scene and providing valuable startup experience to existing talent. This has also been backed by big players in the space. Salesforce, Cisco and Stripe have all hired a healthy presence in Mexico, Twilio, Oracle and RedHat have chosen Colombia and Amazon has put down roots in Argentina. 

Andrew Ng, cofounder of Google Brain and former Chief Scientist at Baidu, opened an AI lab in Medellin back in 2019, incentivising, creating and attracting AI talent to the city and to Colombia as a whole. He announced the move on Twitter stating:

 “AI needs to expand beyond a small handful of hubs like Silicon Valley and Beijing, and I’m bullish about Latin America.”

4. The scope for future disruption is enormous

In a $5 Trillion GDP Market of which tech only contributes 1.5% (compared to 52% in the US and 20% in China), what has taken place over the past three years is just the start. Over the coming years the Latin American tech scene has the momentum to eclipse previous growth. Cloud is set to grow 30% in 2023, 996 million devices in the region are set to be connected to IoT in 2023, and over a billion to 5G by the end of this year. 

As startups in North America and Europe fight over incremental changes in consumer experience, the scope of opportunity for disruption in this part of the world will give us the biggest game-changers of the next five years. The question is –are you paying attention?

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